Team Commotrade (India) Private ... vs Rg Thermal Solution Private Limited

IN THE MATTER OF: Team Commotrade India Private Limited, Having its registered office at: No. 376, New No. 282, Chandan Complex Basement, Mint Street, Chennai - 600079 ...Appellant

Versus

M/s. RG Thermal Solution Private Limited, Having registered office at: 1-FR, FL-1C, 214 Shahid Sunil Sen, Sarani, Kolkata - 700 028 West Bengal ...Respondent

Present: For Appellant : Mr. Jayesh B. Dolia, Mr. Venkat Prabhat and Mr. Varsha N, Advocates

For Respondent : Mr. Palash S. Singhai and Mr. Harshal Sareen, Advocates

JUDGMENT

(Hybrid Mode)

[Per: Arun Baroka, Member (Technical)]

The present Appeal has been filed under Section 61(1) of the

Insolvency and Bankruptcy Code, 2016, challenging the order dated

25.06.2024 passed by the National Company Law Tribunal, Kolkata

Bench in C.P. (IB) No. 211/KB/2022, whereby the Section 9 Petition filed

by the Appellant under the Code was dismissed on the ground of existence of a pre-existing dispute. Appellant's main ground is that the

said finding is erroneous, legally untenable, and contrary to the material

on record as well as settled principles of law.

Submissions of the Appellant

2. The Appellant is Team Commotrade (India) Private Limited, a

company engaged in the business of importing and marketing

agricultural machinery and spare parts, including harvesters,

transplanters, dryers, and tractors, under the brand name "Zoomlion."

The Appellant appoints regional sub-dealers across India for distribution

and sale of its products in various States, including West Bengal. The

Respondent is a company engaged by the Appellant as a sub-dealer for

distribution and sales of harvester machineries for agricultural activities,

spare parts of such harvesters and providing after sale services to the

harvesters. The Appellant herein vide letter of Intent dated 14.09.2019

appointed the Respondent as a subdealer for the purpose of marketing

and selling Rotavator, Tractors, Dryers, Transplanters and Harvesters for

Purba Midnapur and Paschim Midnapur Districts, West Bengal. The

Respondent also issued several purchase orders. As per the Letter of

Intent, the Respondent made a security deposit of ₹10,00,000/- as a

dealer. The Respondent acted on the said Letter of Intent dated

14.09.2019 by placing purchase orders and receiving deliveries under

multiple invoices from 28.03.2019 to 09.08.2021. Against a total invoiced

value of ₹4,04,21,108/-, payments amounting to ₹2,39,31,180/- were

Company Appeal (AT) (Insolvency) No. 2272 of 2024 2 of 34 made, leaving an unpaid balance of ₹1,64,89,928/-. The same stands

admitted through balance confirmation and correspondence

acknowledging liability. The Appellant issued a FORM 3 demand notice

on 11.08.2021 and consequently filed a Section 9 Petition on 07.07.2022

and the same came to be dismissed by the Adjudicating Authority on

25.06.2024.

3. Appellants contends that the findings of the Adjudicating Authority

are based on erroneous appreciation of evidence and misapplication of

the Mobilox Judgement, necessitating interference by this Appellate

Tribunal.

4. NCLT observed that the demand notice under Section 8(1) was

issued on 11.08.2021. The Corporate Debtor gave its reply on

21.08.2021, within the ten-day period permitted by law. A rejoinder to

the reply was sent by the Appellant on 02.09.2021. In the reply to FORM-

3, the Respondent disputed the invoices, questioned the interest

calculation, and complained about termination of dealership without

notice. It also alleged that the harvesters were falsely advertised, of poor

quality, and had led to consumer litigation. The Adjudicating Authority

noted that these issues were not afterthoughts but were continuing

disputes existing prior to the demand notice. The Respondent produced

a notice from the State Consumer Disputes Redressal Commission,

Cuttack concerning defective harvesters in respect of 3rd party

Company Appeal (AT) (Insolvency) No. 2272 of 2024 3 of 34 companies who suffered an arbitral award. It produced a common letter

dated 20.01. 2020 from farmers complaining of defects and asking for

replacement. It is pertinent to note that these letters were not with respect

to the Appellant herein. It also submitted newspaper articles from 2020

reporting the farmers' agitation over defective machines.

5. NCLT also recorded that the principal manufacturer, Zoomlion

Heavy Machinery Co. Ltd., had issued a letter admitting that the

harvesters required upgradation of components. It is pertinent to mention

herein that the said Letter only states that they are upgrading the

machineries and did not at any point of time admit to have issued faulty

machineries. The Tribunal erred in taking the said letter as admission of

a pre-existing dispute and erred in assuming that the principal

manufacturer admitted to having supplied defective machineries. All

these materials, according to the Tribunal, confirmed that the dispute

regarding quality and performance of the machines pre-dated the Section

8 notice. All these defences were without any basis and without any

factual proof.

6. The Bench wrongly relied on Mobilox Innovations Pvt. Ltd. v.

Kirusa Software Pvt. Ltd. [(2017) MANU/SC/1196/2017]. The

Adjudicating Authority found that the defects pointed out by the

Corporate Debtor were genuine and supported by records. It held that

these disputes were not frivolous or an afterthought but had existed

Company Appeal (AT) (Insolvency) No. 2272 of 2024 4 of 34 before the demand notice. Therefore, the claimed amount could not be

treated as an undisputed or crystallized operational debt. It concluded

that there was a pre-existing dispute which bars admission of a petition

under Section 9 of the Code.

7. Appellant Contends that there has not been a single communication

on record to show that the Respondent complained of inferior machine

quality. In fact, the Respondent vide Email dated 17.08.2020 admitted its

liability by setting timelines to make payment. Apart from the same, the

Respondent also requested to issue new machines and spares. Similarly,

the Respondent vide its WhatsApp communication dated 19.11.2020 also

bargained the value of the machineries which shows that there was no

"pre-exiting dispute" before the demand notice was sent. If at all the

Respondent really did have disputes with regard to the machineries or

parts supplied by this Appellant, the Respondent should have raised it at

the earliest point of time and not after FORM 3 was issued by this

Appellant. It is also apposite to state that the Respondent in its Reply to

this Appeal has filed certain alleged letter from its customers. It is

pertinent to mention that even though these letters were not filed by the

Respondent before the Adjudicating Authority, there is no proof to show

that these letters were received by the Respondent at any point of time.

These letters do not have any date nor acknowledgement and some letters

are typed in English and signed in Hindi language. It is also pertinent to

note that the Respondent have also acknowledged the confirmation of Company Appeal (AT) (Insolvency) No. 2272 of 2024 5 of 34 balances and now cannot take such defence which is spurious, illusory

and nothing but a moonshine. The Hon'ble Supreme Court in Mobilox

Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd.,

MANU/SC/1196/2017, held that a "pre-existing dispute" must be real

and plausible, not a mere assertion raised for the first time after receipt

of a demand notice. It is contended that applying these principles, the

Respondent's reply dated 21.08.2021 was the first and only instance

where defective quality was alleged, which is an afterthought and not a

genuine dispute. The Respondent has failed to explain why no such

grievance was ever communicated contemporaneously, particularly when

continuous e-mail and WhatsApp exchanges were taking place regarding

orders and pricing and acknowledgement of payment.

8. Respondent seeks to exclude Invoice No. TCIPL/GST/127 dated

09.08.2021 for ₹ 26,00,000/- on the ground that there are no delivery

challan and details like Bills of Lading, Reference No. & date is not

mentioned and claims it be a bogus invoice. Appellant contends that the

Respondent placed orders for 2 Harvesters for which the Appellant

informed the Respondent that he is invoicing the machines at ₹14.5 Lakh

each. The Respondent bargained the cost by stating that he will take both

the machines from the Appellant if the same is billed at ₹ 13 Lakh each.

The Appellant by accepting the same, billed the Appellant at ₹26,00,000/-

and a GST bill for the same was raised on 09.08.2021 and machines were

received by him. During the course of arguments, the Respondent Company Appeal (AT) (Insolvency) No. 2272 of 2024 6 of 34 contended that these machineries were not delivered to the Respondent

which is contrary to his submissions before the Hon'ble Adjudicating

Authority wherein the Respondent has accepted that he received the

machineries from the Appellant which is from the same place mentioned

in the invoice dated 09.08.2021.

9. The Respondent admits the receipt of machineries supplied by the

Appellant but did not raise any dispute with respect to the same at any

point of time. There is absolutely no communication of any machinery

supplied to the Respondent being defective until the Appellant sent a

FORM 3 Demand notice.

10. Appellant relies upon the judgment of this Appellate Tribunal in the

matter of R.A.J Krishna Construction Company Pvt Ltd., Vs Newera

Solutions Private wherein it was held that:

"12. It is also a well settled proposition of law that for a pre- existing dispute to be a ground to nullify an application under Section 9, the 6 dispute raised must be truly existing at the time of filing a reply to notice of demand as contemplated by Section 8(2) of IBC or at the time of filing the Section 9 application."

"17. The pre-existing dispute must relate to the transaction or debt that forms the basis of the Section 9 application."

(Emphasis Supplied)

11. The Respondent during the course of arguments also argued that

the Petition is barred due to the provisions of Section 10A of IBC.

Company Appeal (AT) (Insolvency) No. 2272 of 2024 7 of 34 Appellant contends that Section 10A provides that no Petition shall be

filed for initiation of CIRP for a default occurring on or after 25.03.2020

and before 24.03.2021. However, in the present case, the default pertains

to the outstanding liability under various invoices and the last of such

invoice is dated 09.08.2021 which is after the Section 10A period and

hence the Respondent's reliance on this Section is completely

misconceived.

12. Appellant contends that the last invoice was raised on 09.08.2021

(Invoice No. TCIPL/GST/127), and payment was not made thereafter.

Even assuming earlier invoices existed, the ledger and balance

confirmation show continuing liability acknowledged as late as of March

2020, thereby creating a fresh and continuing cause of action extending

well beyond the Section 10A window. The Respondent's letter dated

17.08.2020 and subsequent correspondences admitting liability, request

further supply and payment credited, evidences that the relationship

continued even beyond the 10A window. The acknowledgment of debt and

continued non-payment after March 2021 excludes any application of

Section 10A and thus the Respondent cannot rely on this submission.

Even assuming for the sake of argument that the invoices amounting to

₹45,07,324/- fall within the ambit of Section 10A of the Insolvency and

Bankruptcy Code, 2016, the present petition would nevertheless remain

maintainable because the admitted liability crosses the threshold limit of

₹1,00,00,000/-. The last invoice was raised on 09.08.2021 and the Company Appeal (AT) (Insolvency) No. 2272 of 2024 8 of 34 Respondent defaulted in payment thereafter, i.e., well beyond the

suspension period under Section 10A. Accordingly, the Respondent's plea

that the present petition is barred by Section 10A of the Code is untenable

in fact and in law, as the default continued even after the suspension

period, the debt remains continuing and acknowledged, and the right to

initiate CIRP is therefore maintainable.

13. The contention that tax invoices are not as per the GST Act is legally

untenable, since the Respondents have accepted the receipt of machines

and spares and acknowledged the liability and did not raise existence of

a dispute till FORM 3 was issued by this Appellant. The Respondent also

raised a contention which were not part of the submissions before the

Hon'ble NCLT in his pleadings.

14. In the case of Mr. G. Ramakrishna Reddy V Manjeet Bucha &

Anr, Company Appeal(AT)(CH)(INS) No. 198 of 2021, the Hon'ble

NCLAT held that the role of the Adjudicating Authority should be limited

to establish that the debt is due, remains unpaid and the default occurred

with the minimum threshold of ₹1 Crore. (Paragraph 25)

"The Hon'ble Supreme Court of India has also held in catena of the judgments that the role of the 'Adjudicating Authority' should be limited to establish that debt is due, remains unpaid and default has occurred with minimum threshold of Rs. 1 crore, then the 'Adjudicating Authority' should admit the Section 9 application. The Apex Court has also held that their should be minimum judicial interventions."

(Emphasis supplied)

Company Appeal (AT) (Insolvency) No. 2272 of 2024 9 of 34

15. The Respondent further contended that the interest amount cannot

be clubbed with the principal for determining the quantum of operational

debt. The said contention is wholly misconceived. All the invoices raised

by the Appellant expressly stipulate that interest at the rate of 24% per

annum shall be charged for delayed payments, and the Respondent,

having accepted the goods under those invoices is deemed to have

accepted the terms in their entirety. The Respondent has made part-

payments against the some of the invoices without ever disputing the

interest clause. Having acted upon the invoices, the Respondent cannot

now be permitted to deny the applicability of interest or to assert that the

operational debt should be confined only to the principal amount. This

Appellant restricted the claim for interest only at 18% per annum, on the

defaulted claim. This Appellant relies on a Judgement of this Hon'ble

Tribunal in Prasant Agarwal Vs. Vikash Parasrampuria (Company

Appeal (AT)(INS) No. 690 of 2022) wherein the Hon'ble Tribunal has

held as follows:

"It is, therefore, clear from these facts that the total amount for maintainability of claim will include both principal debt amount as well as interest on delayed payment which was clearly stipulated in the invoice itself. It is noted that the total principal debt amount of Rs. 97,87,220/- along with interest the total debt makes total outstanding as Rs. 1,60,87,838/-. Thus, the total debt outstanding of OC is above Rs. 1 crore as per requirement of Section 4 IBC read with notification No. S.O 1205 (E) dated 24.3.2020 (Supra), and meets the criteria

Company Appeal (AT) (Insolvency) No. 2272 of 2024 10 of 34 of Rs. 1crore as per 9 Section 4 of IBC and Application is therefore maintainable in present case."

(Emphasis supplied)

16. The Respondent's letter dated 17.08.2020 specifically acknowledges

the dues payable and proposes a schedule for repayment. Further, by its

communication dated 07.11.2020, the Respondent again requested the

Appellant to continue supplies and assured payment. These

communications constitute a clear acknowledgment of liability under

Section 18 of the Limitation Act and independently demonstrate that no

dispute raised prior to the Section 8 notice.

17. In view of the above submissions, Appellant appeals to aside the

order dated 25.06.2024 in CP(IB)/211/KB/2022.

Submissions of Respondent

18. The instant Appeal as well as the Petition filed under Section 9 of

the IBC is not maintainable in view of the fact that the debt, if any, is

below the threshold of ₹1 Crore as prescribed under Section 4 of IBC.

Further, the invoices alleged to be in default are falling within the

restricted period under Section 10A of IBC. It is contended that the entire

case of Appellant is premised on letter dated 17 th August 2020 at page

483 of Appeal wherein the Respondent agreed to pay ₹1,45,00,000/- on

or before 31st March 2021 and the default in making the said payment

accrued during the 10A period, hence the petition under Section 9 of IBC

as well as the instant appeal is not maintainable. It is a trite law that even

if a defence has not been taken that the Petition is barred under Section

Company Appeal (AT) (Insolvency) No. 2272 of 2024 11 of 34 10A of IBC, it is the duty of the Adjudicating Authority to scrutinise

whether the invoices are barred by law or not and this Appellate Tribunal

has affirmed the said position of law in case of Comet Performance

Chemicals Private Ltd. vs Aarvee Denims and Exports Limited 2025

SCC Online NCLAT 53 at para 21 and also in case of Bhavit Seth vs

Madan Bajrang Lal Vaishnawa & Anr. CA (AT) (Ins.) No. 328 of 2024

at para 13-15.

19. Respondent contends that the parties herein mutually agreed for

the payment of the invoices upon the expiry of 30 days from the date of

invoice. However, Appellant as per its whims and fancies changed the

payment terms in invoices as certain invoices suggest immediate

payment, certain invoices suggest payment within 30 days and several

invoices does not indicate any payment terms. In such circumstances it

is pertinent to mention that due date of invoices is crucial to ascertain

when the same became due and payable to arrive at a default date for

triggering Section 8 and Section 9 of IBC.

20. In the instant case invoices raised during March 2020 to May 2020

which were payable after 30 days became due and payable during the

restricted/prohibited period as stipulated under Section 10A of IBC. For

the sake of brevity and convenience of this Hon'ble Tribunal a table is

reproduced hereinbelow depicting the invoices which fell due during the

restricted period:

Company Appeal (AT) (Insolvency) No. 2272 of 2024 12 of 34 Sr. No. Invoice No. Date of Due Date Amount Invoice (in Rupees)

1. GST/80 20.05.2020 20.05.2020 3,493/-

2. GST/72 20.05.2020 20.05.2020 5,65,731/-

3. GST/71 20.05.2020 20.05.2020 2,53,705/-

4. GST/55 15.05.2020 15.05.2020 616/-

5. GST/54 15.05.2020 15.05.2020 19,628/-

6. GST/20 22.04.2020 21.05.2020 59,835/-

7. GST/19 22.04.2020 21.05.2020 9,763/-

8. GST/16 21.04.2020 20.05.2020 59,386/-

9. GST/15 21.04.2020 20.05.2020 4,98,875/-

10. GST/14 21.04.2020 20.05.2020 31,632/-

11. GST/704 16.03.2020 15.04.2020 40,940/-

12. GST/703 16.03.2020 15.04.2020 83,500/-

13. GST/702 16.03.2020 15.04.2020 20,539/-

14. GST/701 13.03.2020 12.04.2020 6,272/-

15. GST/700 13.03.2020 12.04.2020 4,32,923/-

16. GST/699 13.03.2020 12.04.2020 55,572/-

17. GST/698 13.03.2020 12.04.2020 51,019/-

18. GST/697 13.03.2020 12.04.2020 94,319/-

19. GST/696 13.03.2020 12.04.2020 1,08,204/-

20. GST/695 13.03.2020 12.04.2020 81,286/-

21. GST/694 13.03.2020 12.04.2020 79,509/-

22. GST/693 13.03.2020 12.04.2020 1,12,871/-

23. GST/692 13.03.2020 12.04.2020 1,62,172/-

24. GST/691 13.03.2020 12.04.2020 58,603/-

25. GST/690 13.03.2020 12.04.2020 48,923/-

26. GST/689 13.03.2020 12.04.2020 14,499/-

27. GST/688 13.03.2020 12.04.2020 1,72,641/-

28. GST/687 13.03.2020 12.04.2020 3,27,131/-

29. GST/686 13.03.2020 12.04.2020 1,06,717/-

30. GST/685 13.03.2020 12.04.2020 1,88,912/-

31. GST/684 13.03.2020 12.04.2020 57,349/-

32. GST/683 13.03.2020 12.04.2020 32,877/-

33. GST/682 13.03.2020 12.04.2020 23,859/-

34. GST/681 16.03.2020 15.04.2020 68,131/-

35. GST/680 13.03.2020 12.04.2020 1,20,808/-

36. GST/679 13.03.2020 12.04.2020 46,596/-

37. GST/678 13.03.2020 12.04.2020 49,285/-

38. GST/677 13.03.2020 12.04.2020 51,922/-

39. GST/676 13.03.2020 12.04.2020 38,175/-

40. GST/675 13.03.2020 12.04.2020 65,922/-

41. GST/674 13.03.2020 12.04.2020 37,102/-

42. GST/673 13.03.2020 12.04.2020 1,00,650/-

43. GST/672 13.03.2020 12.04.2020 45,852/-

44. GST/671 13.03.2020 12.04.2020 19,580/-

Total 45,07,324/-

Company Appeal (AT) (Insolvency) No. 2272 of 2024 13 of 34

21. The aforementioned invoices became due and payable during the

restricted period under Section 10A of the Code and consequently no

application under Section 9 of the Code could have been filed on strength

of these aforementioned invoices. Though the parties agreed for the

payment of invoices upon the expiry of 30 days from the date of invoice,

the Appellant in most of the aforementioned invoices did not mention

contained nothing with respect to the payment terms, in absence of

which, it can be inferred that the invoices wherein no payment terms are

provided are due for the payment within the reasonable time from the

date of receipt of such invoices. Further, as per the trade practise of the

industry 30 days from the date of receipt of such invoices is to be

considered as a reasonable period for the payment. Hence, the

aforementioned invoices are hit by Section 10A of the Code, consequently,

the Petition under Section 9 would be non-maintainable. The said

position has been affirmed by this Hon'ble Appellate Tribunal in the case

of Manishaas Infratecho Solutions Pvt. Ltd. v Bhonu Hulshi Real

Estate Private Ltd. 2024 SCC Online NCLAT 822 at para 17-20 and it

was held that in case if no due date is mentioned in the invoices the same

will become due within reasonable time period i.e., 30 days.

22. Furthermore, it is relevant to note that the alleged principal amount

as claimed by the Appellant is ₹1,64,89,928/- which includes the alleged

invoice no. TCIPL/GST/127 dated 09.08.2021 for ₹ 26,00,000/- for the

purchase of alleged 2 Harvester in the month of April 2020 which the Company Appeal (AT) (Insolvency) No. 2272 of 2024 14 of 34 Respondent did not purchase and no delivery challan of the same are

annexed. Further, the submission of the Appellant that (pg 71) raises

serious question as to the sanctity of invoice no. TCIPL/GST/127 which

was raised on 09.08.2021, more than 16 months from the date of alleged

delivery.

23. It is pertinent to mention that the Appellant herein raised the

alleged GST invoice in the month of August 2021 in order to avoid the

embargo of Section 10A of IBC. As per Section 31 of GST Act, 2017 it is

incumbent upon the seller of goods to generate the GST invoice at the

time of removal of goods for supply to the recipient or delivery of goods

which has not happened in the instant case. Further, the said invoice has

been unilaterally raised by the Appellant without there being any

agreement between the parties about the price. Further, the invoice had

to be generated in April 2020, however owning to dispute between the

parties regarding the price the same was not generated which is evident

from page 485 of Appeal wherein both the parties were negotiating qua

the price till 19th November 2020, however, nothing was finalized as

Respondent informed the Appellant to keep the harvesters. Further, the

Appellant on 30th November 2020 unliterally asked the respondent to pay

₹20 Lakh without any consensus between the parties.

24. Respondent further contends that in view of the same the alleged

invoice amount should be to be deducted from the alleged principal debt

Company Appeal (AT) (Insolvency) No. 2272 of 2024 15 of 34 as claimed and also the amount which fell due during 10A period under

the Code should also be deducted:

Particular Amount in ₹

Principal Amount 1,64,89,928/-

(Invoice No. GST/127) (-26,00,000)/-

Amount which falls under Section (-45,07,324)/- (10A) Total 93,82,604/-

Hence the Petition under Section 9 of IBC is not maintainable as it is

below the threshold prescribed under Section 4 of IBC. Further,

unilateral imposition of the interest cannot be considered to cross the

threshold in the absence of mutual agreement between the parties.

25. This Appellate Tribunal in Decor Paper Mills Ltd. v Mahashakti

Plasto Pvt. Ltd. in CA (AT) (Ins.) No.2022 of 2024 has held that invoices

falling within 10A period must be excluded from default claims. Further,

the Hon'ble Supreme Court in Ramesh Kymal v Siemens Gamesa

Renewable Power (P) Ltd. (2021) 3 SCC 224 at para 27 has

categorically held that no application for initiation of CIRP can be initiated

for a default occurring on or after 25.03.2020. The Hon'ble Supreme

Court held that the expression "shall never be filed with the clear

indicator that the intent of legislature is to bar institution of any

application.

26. The Appellant with an oblique and ulterior motive to cross the

Company Appeal (AT) (Insolvency) No. 2272 of 2024 16 of 34 minimum threshold as stipulated under the IBC has included the interest

on delayed payment @ 24% per annum in the alleged default amount.

Appellant herein has unilaterally levied the interest on the delayed

payment without there being any mutual contract and agreement

between the parties. The reliance placed by the Appellant on the

boilerplate clause as mentioned in the invoice which were issued by them

are vague and cannot be held to be binding on the Respondent when the

parties acted contrary to the same. Provision in the invoice says that the

Respondent shall be liable to pay interest on the delay payment but no

period of payment has been prescribed in the invoice, therefore, it is not

known as to from which date the interest has been charged by the

Appellant. This clause in the invoice is totally vague because it does not

specify the period within which the amount was to be paid. Secondly, it

is trite law that interest will be charged as per the agreed terms whereas

no agreed terms have seen the light of the day to enable the Appellant to

claim interest as a part of debt and the same is clear from the alleged

ledger entries produced by the Appellant.

27. In view of the aforesaid factual situation read with the law laid down

by this Appellate Tribunal it is contended that unilateral inclusion of the

interest amount in the alleged default amount is unwarranted and not

permissible which has been confirmed by this Hon'ble Tribunal in Comet

Performance Chemicals Private Ltd. v Aarvee Denims and Exports

Limited 2025 SCC Online NCLAT 53.

Company Appeal (AT) (Insolvency) No. 2272 of 2024 17 of 34

28. The Petition preferred before this Ld. Adjudicating Authority is not

maintainable as there exist pre-existing disputes between the Parties

herein. It is submitted that the Respondent deposited a security deposit

of ₹10,00,000/- (Rupees Ten Lacs Only) after the receipt of the security

deposit by the Appellant, a draft copy of a Letter of Intent (hereinafter

referred to as "LOI") was shared, however, the content of the LOI by and

large were in favour of the Appellant and was unilaterally prepared to

cater the objectives of the Appellant only and no leeway was given to the

Respondent. Hence, till date the LOI was not executed and parties were

doing business as per the mutual understanding. Further, the Appellant

had supplied 15 harvesters in total, out of the above-mentioned

harvesters supplied by the Appellant, the Respondent had supplied 13

harvesters to final consumers. That it is pertinent to state that most of

the harvesters supplied to the consumers started to have mechanical

malfunctioning after using it between 50 hours and 100 hours and post

usage of the harvesters for 500 hours, these harvesters were completely

breaking down, which has been duly considered by the Adjudicating

Authority while passing the Order dated 25.06.2024.

29. Out of these 13 harvesters sold, 6 harvesters comprising almost

50% of the harvesters sold, were returned and exchanged owing to the

continuous breakdown of the machinery, massive mechanical

malfunctioning just at the beginning of harvesting season and further out

of these 6 returns, 3 customers had in writing requested for the exchange Company Appeal (AT) (Insolvency) No. 2272 of 2024 18 of 34 of the harvesters at the earliest as the mechanical breakdown of the

harvester had occurred during the harvesting season and the crops would

be required to be harvester with a specified time period. Hence, the

Respondent had to exchange the faulty harvester with a harvester of a

different Company to accommodate the customer's urgent need and 2

harvesters remained unsold due to its poor performance.

30. For the exchanged harvesters, the Respondent had to bear

convenience cost and other administrative cost to deliver the exchanged

harvesters to the consumers. Furthermore, remaining 5 consumers to

whom the harvesters were sold had also filed complaint with the

Respondent with regard to the return of the harvesters as the harvesters

that were supplied to the consumers were also malfunctioning and

ultimately had a permanent breakdown and has become scrap and junk

and are lying with the said consumers till date with no value whatsoever.

31. Many other consumers had also lodged complaints and have filed

suits against the dealer/agents of the Operational Creditor being M/s

Bisakha Agro and its proprietor i.e., Mr. Abhimanu Bhinda in the matter

Misc. No. 238-239 of 2020 in Consumer Complaint No. 32 of 2020. It is

pertinent to note that the Respondent herein was not a party to the

aforementioned consumer complaint, the issues pointed out in said

matter substantiate its contentions regarding the quality disputes of the

goods delivered to the Corporate Debtor.

Company Appeal (AT) (Insolvency) No. 2272 of 2024 19 of 34

32. The fact that the machines/harvesters were operating far below the

optimal levels is also clear from the fact that the principal manufacturer

and principal supplier of machines also unequivocally accepted that there

was a problem with the machine and same were being upgraded. The

Principal Manufacturer i.e., Zoomlion Heavy Machinery Co. Ltd. vide

letter dated 10.07.2019 admitted to the need for upgrading of

components of machinery, which is duly considered by the Adjudicating

Authority while dealing with the issue of pre-existing dispute in the

Petition. The machines of Zoomlion sold by the Appellant were faulty and

various consumers all across the West Bengal and Odisha raised this

issue and agitated the same before the appropriate authorities. In this

regard various newspaper articles from 2020 has covered the agitation by

the farmers and grievances of the consumers regarding the defects of the

harvesters were mentioned.

33. It is also germane to mention herein that few customers had

dumped the harvesters before the Respondent herein in name of

servicing, after the harvesters started malfunctioning followed by its

break down. Further these customers were reluctant to take back the

faulty harvesters and demanded the refund of the amount paid by them.

34. The Appellant herein intentionally dumped the spare parts of

different specifications with the Respondent herein inspite of the fact that

it was well known to the Respondent that the harvesters were remaining

Company Appeal (AT) (Insolvency) No. 2272 of 2024 20 of 34 unsold and there were return of the harvesters as well as these spare

parts would be of no use to the Respondent. It is incumbent to mention

herein that the Respondent time and again requested the Appellant to

take back the spare parts and harvesters lying with the Respondent as

these harvesters were not saleable owing to its terrible and poor

performance. However, the Appellant malafidely did not do so and the

Appellant always requested the Respondent to communicate with the

officials immediately on the phone call to resolve the issues. The

Respondent being new in the business line of Harvesters was solely

relying upon the representations and guidance of the Appellant and the

Appellant while taking the advantage of the same restrained the

Respondent from raising any written request for any issue qua the

transactions.

35. The Appellant herein has raised a frivolous ground that there was

no pre-existing dispute, alleging that the Respondent herein at no point

of time raised any dispute before the receipt of Demand Notice dated

11.08.2021. It is relevant to mention herein that as soon as the

Respondent herein started returning the Harvesters i.e., on 08.08.2021,

the Respondent verbally communicated it to the Appellant and Appellant

very mischievously issued a demand notice dated 11.08.2021 under

Section of IBC in order to avoid receipt of detailed complaints from

Respondent of the consumers qua the harvesters which were returned.

Company Appeal (AT) (Insolvency) No. 2272 of 2024 21 of 34

36. The Respondent heavily relies on the Hon'ble Apex Court judgement

in the matter of "Mobilox Innovations Private Limited Vs. Kirusa

Software Private Limited in Civil Appeal No. 9405 of 2017" and

claims that due existence of the dispute Section 9 Petition is liable to be

dismissed.

37. In view of the same the Appeal is liable to be dismissed as the

Appellant is using the IBC as a mechanism for recovery for amount, while

the inferior quality goods of Appellant are lying with the Respondent

which the Respondent had asked the Appellant to lift from the ware

house.

Appraisal

38. We have heard the counsels of both sides and also perused the

material placed on record. We find that this Appeal was filed under

Section 61 of the Insolvency and Bankruptcy Code, 2016, challenging the

order dated 25.06.2024 passed by the National Company Law Tribunal

(NCLT), Kolkata Bench in C.P. IB No. 211/KB/2022, which dismissed the

Appellant's Section 9 Petition on the grounds of a pre-existing dispute.

39. The main issue before us is whether a preexisting dispute exists

between the Appellant claiming to be operational creditor and the

respondent basis which the Adjudicating Authority had dismissed the

Appellants' Section 9 petition.

Company Appeal (AT) (Insolvency) No. 2272 of 2024 22 of 34

40. We note that the Appellant, Team Commotrade India Private

Limited, is a company engaged in importing and marketing agricultural

machinery under the brand "Zoomlion" through a network of sub-dealers

across India. The Respondent was appointed as a sub-dealer for the

Purba Midnapur and Paschim Midnapur districts of West Bengal via a

Letter of Intent dated 14.09.2019. Pursuant to this, the Respondent made

a security deposit of ₹10,00,000 and placed multiple purchase orders

with the Appellant between 28.03.2019 and 09.08.2021. We find that

across all transactions, a total invoiced value of ₹4,04,21,108/- was

generated, against which the Respondent paid ₹2,39,31,180/-, leaving an

unpaid balance of ₹1,64,89,928/-. On 11.08.2021, the Appellant issued

a Form 3 demand notice, subsequently filing a Section 9 Petition on

07.07.2022, which was dismissed by the Adjudicating Authority on

25.06.2024. It is to be noted that total amount of debt claimed as per Part

IV is ₹2,37,84,627.60 (Rupees Two Crore Thirty Seven Lakh Eighty Four

Thousand Six Hundred and Twenty Seven and Paisa Sixty Only) with date

of default being 09.08.2021 and this amount also includes interest at

18% p.a. from the date of invoice till realisation.

41. Now we delve into concerns raised by both parties and their over-

all impact on the dispute between them and final decision of the

Adjudicating Authority.

Company Appeal (AT) (Insolvency) No. 2272 of 2024 23 of 34 Interest in invoices

42. While discussing the interest claimed on operational debt, the

Appellant refers points to contractual terms stipulating a 24% per annum

interest rate on delayed payments basis the invoices, which the

Respondent accepted and partially honored. The Appellant further states

that it conservatively reduced the interest rate to 18% for the petition

claim and claims that both principal and agreed interest must be

included to calculate operational debt under the IBC. The Respondent

disputes this position, contending that the interest calculation is vague,

the purported term was unilaterally imposed, and the payments' varied

which contradicts a uniform interest claim. The Respondent insists to

exclude interest from the principal debt calculation for insolvency

proceedings threshold assessment and claims unilateral inclusion of the

interest amount in the alleged default amount is unwarranted and not

permissible which has been confirmed by this Appellate Tribunal in

Comet Performance (supra) and which supports the case of the

Respondent. The relevant portion of this judgement is extracted as below:

"...

17. The Respondent relies upon Rishabh Infra Through Hari Mohan Gupta vs Versus Sadbhav Engineering Ltd [Company Appeal (AT) (Insolvency) No. 1881 of 2024] wherein it has been held that invoices with interest clauses, which were not part of the formal agreement, are unenforceable. This judgment supports the case of the Respondent.

Company Appeal (AT) (Insolvency) No. 2272 of 2024 24 of 34

18. Accordingly, we agree with the submissions of the Respondent and also the findings of the Adjudicating Authority that no interest can be charged against the supply of goods and services for delayed payments until and unless there is an express agreement between the parties. We find justification in the claim of the Respondent that the interest claim was unilaterally imposed and lacked any contractual basis.

19. Next we look into the exclusion of Claims falling within the Section 10 A period. The invoices dated between 29.11.2019 and 07.02.2020, amounting to Rs 36,46,200/- (rupees thirty-six lakhs, forty-six thousand and two hundred only) fall within the restricted period under Section 10 A of the IBC. As such, defaults related to these invoices cannot form the basis of an Insolvency Application. Deducting this amount from the total alleged outstanding of Rs 1,36,30,679/- (rupees one crore, thirty-six lakhs, thirty thousand, six hundred and seventy-nine only) reduces the admissible claim to Rs 99,84,479/- (rupees ninety-nine lakhs, eighty-four thousand, four hundred and seventy-nine only) which remains below the statutory threshold of rupees one crore. It is to be noted that this gets further reduced on deduction of the claims of interest.

20. The Respondent has also placed his reliance on the judgment of this Tribunal in Decor Paper Mills Ltd vs Mahashakti Plasto Pvt Ltd in Company Appeal (AT) (Insolvency) No. 2022 of 2024 which establishes that invoices falling within the 10 A period must be excluded from default claims. Therefore, the Application filed by the Appellant under Section 9 is not maintainable on this count also, as the default amount is below the statutory threshold."

[Emphasis supplied]

We concur with the arguments of the Respondent to exclude interest as

was expounded by us in above judgment. Thus, we observe that until

there is a prior agreement between the CD and OC, interest cannot be Company Appeal (AT) (Insolvency) No. 2272 of 2024 25 of 34 charged by OC. Further initial interest rate claimed was 24% which was

changed to 18% - both terms done unilaterally. Therefore, we are

considering the total debt to be ₹1,64,89,928/- for further analysis of this

case and not ₹2,37,84,627.60, which includes interest.

Disputed invoice

43. Concerning the specific invoice numbered TCIPLGST127,

amounting to ₹26,00,000/- [@71 APB], the Appellant argues that this

invoice represents a negotiated and accepted supply of two harvesters,

each priced at ₹13 lakh. The Appellant maintains that the Respondent

raised no objections until the litigation stage. Challenging it, the

Respondent describes this invoice as "bogus," asserting it was

unilaterally generated in August 2021 to circumvent the Section 10A bar,

purporting delivery of goods supposedly supplied on 15 April 2020 but

without any supporting delivery documentation [@71 APB - just tax

invoice without Bill of lading etc. and no terms of delivery]. The

Respondent maintains that price negotiations for these goods were never

finalized, rendering this invoice liable to exclusion [@486, WhatsApp chat

dated 19.09.2020 confirming non-finalization and dispute]. We find this

invoice to be a disputed one and this needs to be excluded from total

claim of ₹1,64,89,928/-.

Pre-existing dispute

44. Addressing the evidence of product defects and service disputes, the

Appellant argues that no contemporaneous complaints or Company Appeal (AT) (Insolvency) No. 2272 of 2024 26 of 34 acknowledgments of defects were made by the Respondent prior to the

demand notice. The Appellant further notes that customer letters and

complaints submitted by the Respondent are undated, unauthenticated,

and were not presented during earlier proceedings before the NCLT, thus

lacking evidentiary value. On the other hand, the Respondent maintains

that many harvesters repeatedly malfunctioned, were returned or

exchanged, and rendered unusable. They assert that numerous written,

verbal, and legal grievances were raised by customers, with the Appellant

failing to address these issues or lift unsold or returned goods. This, the

Respondent insists, clearly demonstrates a genuine, ongoing dispute

before any insolvency proceedings. Further, in relation to the existence of

a pre-existing dispute, the Appellant contends there was no genuine

dispute before the Form 3 demand notice dated 11.08.2021. The

Appellant emphasizes that all communications preceding the notice,

including emails and WhatsApp exchanges, consistently acknowledged

the Respondent's liability and reflected ongoing business without any

product quality complaints. On the other hand, the Respondent claims

that the dispute originated well before the demand notice. Respondent

cites multiple malfunctions of the supplied harvesters, reports of

returned products, consumer complaints, ongoing litigations, and

acknowledgment by the principal manufacturer himself about the need

for upgrades and improvements. The Respondent asserts that these facts

evidence a bona fide, pre-existing dispute.

Company Appeal (AT) (Insolvency) No. 2272 of 2024 27 of 34

45. In this backdrop, before deciding the matter in hand, we look into

the provisions of Section 9 which is reproduced as below:

"Section 9. Application for initiation of corporate insolvency resolution process by operational creditor.

(1) ...

(2) ...

(3) ...

(4) ...

(5) The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub-section (2), by an order

(i) admit the application and communicate such decision to the operational creditor and the corporate debtor if,--

(a) the application made under sub-section (2) is complete;

(b) there is no 3 [payment] of the unpaid operational debt;

(c) the invoice or notice for payment to the corporate debtor has been delivered by the operational creditor;

(d) no notice of dispute has been received by the operational creditor or there is no record of dispute in the information utility; and

(e) there is no disciplinary proceeding pending against any resolution professional proposed under sub-section (4), if any;

(ii) reject the application and communicate such decision to the operational creditor and the corporate debtor, if--

(a) the application made under sub-section (2) is incomplete;

(b) there has been 3[payment] of the unpaid operational debt;

(c) the creditor has not delivered the invoice or notice for payment to the corporate debtor;

(d) notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility;"

Company Appeal (AT) (Insolvency) No. 2272 of 2024 28 of 34

46. The above provisions are very clear that if a notice of dispute has

been received by the operational creditor, then the Adjudicating

Authority will reject the application under Section 9. In this case we find

incontrovertible records that there is a dispute.

47. The Respondent heavily relies on judgement of the Hon'ble Apex

Court in the matter of "Mobilox Innovations Private Limited Vs.

Kirusa Software Private Limited in Civil Appeal No. 9405 of 2017"

wherein it has deliberated on the issue of "pre-existing dispute" in

relation to a Petition under Section 9 of the Code and observed that in

case where there is an existence of the dispute, such Section 9 Petition

is liable to be dismissed. The Hon'ble Supreme Court in Mobilox

Innovations observed as follows:

"It is clear, therefore, that once the operational creditor has filed an application, which is otherwise complete, the adjudicating authority must reject the application under Section 9(5)(2)(d) if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility. It is clear that such notice must bring to the notice of the operational creditor the "existence" of a dispute or the fact that a suit or arbitration proceeding relating to a dispute is pending between the parties. Therefore, all that the adjudicating authority is to see at this stage is whether there is a plausible contention which requires further investigation and that the "dispute" is not a patently feeble legal argument or an assertion of fact unsupported by evidence. It is important to separate the grain from the chaff and to reject a spurious defence which is mere bluster. However, in doing so, the Court does not need to be

Company Appeal (AT) (Insolvency) No. 2272 of 2024 29 of 34 satisfied that the defence is likely to succeed. The Court does not at this stage examine the merits of the dispute except to the extent indicated above. So long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has to reject the application."

[Emphasis supplied)

48. We note that the parties sharply disagree on the role of the

Adjudicating Authority, invoking the landmark Mobilox Innovations

judgment. The Appellant stresses that the NCLT's role is confined to

verifying debt existence, default, and statutory threshold compliance, and

that a dispute relied upon to deny admission must not be speculative or

an afterthought. In this case, they argue the Respondent raised quality

issues only after the demand notice, rendering the dispute nonexistent

for the purposes of the IBC proceeding. Conversely, the Respondent

submits that the NCLT properly exercised its discretion by examining the

evidence and context, finding a plausible and bona fide dispute. They

emphasize that the Insolvency law requires consideration of whether a

dispute is "plausible" rather than definitively resolved, which is satisfied

here through extensive consumer complaints, internal communications,

and manufacturer admissions.

49. In the facts and circumstances of the case we find that it is not a

moonshine defense and in a plausible dispute and is a fit case for a pre-

existing dispute, as contemplated by Section 8(2) of IBC or at the time of

filing the Section 9 application, and to be a ground to nullify an

Company Appeal (AT) (Insolvency) No. 2272 of 2024 30 of 34 application under Section 9. And we need not consider any other ground

for entertaining the Appeal. But for sake of completeness, we have delved

into other issue raised by the Appellant.

10A period invoices

50. Regarding the Section 10A bar itself, the Appellant argues it is

inapplicable to this case, as the most recent default occurred after the

COVID-19 suspension period expired in March 2021. The Appellant adds

that the Respondent continued to acknowledge and make partial

payments beyond that date. In stark contrast, the Respondent insists

that numerous invoices fell due during the Section 10A restriction

window and that the law mandates exclusion of any such invoices for

Section 9 petition maintainability. The Respondent challenges

maintainability on the ground that certain invoices totaling ₹45,07,324/-

fall within the Section 10A restricted period. According to the

Respondent, deducting this disputed amount and also the disputed

invoice of a ₹26,00,000/- invoice as was noted earlier, brings the claim

below the threshold.

51. In Comet Performance Chemicals Private Ltd. v Aarvee Denims

and Exports Limited 2025 SCC Online NCLAT 53 there was a similar

situation and this Appellate Tribunal had noted as follows:

"...

20. The Respondent has also placed his reliance on the judgment of this Tribunal in Decor Paper Mills Ltd vs Mahashakti Plasto

Company Appeal (AT) (Insolvency) No. 2272 of 2024 31 of 34 Pvt Ltd in Company Appeal (AT) (Insolvency) No. 2022 of 2024 which establishes that invoices falling within the 10 A period must be excluded from default claims. Therefore, the Application filed by the Appellant under Section 9 is not maintainable on this count also, as the default amount is below the statutory threshold.

21. Furthermore, it is to be noted that even if the dispute relating to invoices falling within 10 A period is not raised by the Respondent, as is being argued by the Appellant, it is not a bar as it is the duty of the Adjudicating Authority to scrutinise whether the invoices are barred by law or not."

[Emphasis supplied)

52. In a similar situation in this, we are therefore, inclined to agree with

above justification that invoices of 10A period should be deducted from

the total amount, which fell due during 10A period as also the disputed

amount, making the total amount to be less than threshold of ₹1 crore.

And in that case, the Petition under Section 9 of IBC becomes not

maintainable as per below mentioned calculation:

Particulars Amount in ₹

Principal Amount (without interest) 1,64,89,928/ - (Invoice No. GST/127) (as discussed earlier) (-26,00,000)/-

Amount which falls under Section (10A) (-45,07,324)/- (as discussed above)

Total 9382604/-

53. This case can be decided solely bases the dispute which arises from

disputed invoice of ₹26 lakhs as also the argument that invoices of 10A

period amounting to ₹45,07,324/- has to be excluded and is more than

Company Appeal (AT) (Insolvency) No. 2272 of 2024 32 of 34 sufficient to come to a conclusion that the Appellant doesn't meet the

threshold on top of all this if the arguments of a preexisting dispute is

considered the Appellant doesn't stand a chance to succeed under the

Code and it may pursue other legal remedies.

Conclusions

54. We conclude that even though the Appellant claims that no real,

prior dispute existed as all written evidence (emails, WhatsApp) before

demand notice confirms liability and continuing business with requests

for further supply, without raising product complaints. However, we find

the counter arguments of the Respondent to be convincing that dispute

existed much before demand notice as multiple harvesters

malfunctioned; customers returned products; complaints, suits, and

demand for replacements occurred in 2020-21; principal manufacturer

acknowledged need for upgrades. Thus, in the facts and circumstances

of the case we do not find that this is a case of moonshine defense, created

by the respondent. Dispute existed prior to the issuance of Demand

notice.

55. We also find that Debt due is ₹1,64,89,928/- after accounting for

payments and excluding interest claimed and If Section 10A invoices are

excluded, debt comes down by ₹45,07,324/-. We also note that invoice

(notably No. TCIPLGST127 for ₹ 26,00,000) is claimed to be bogus due to

missing delivery documentation claimed non-receipt of goods which

cannot be adjudicated by us under the code - which is also leading to Company Appeal (AT) (Insolvency) No. 2272 of 2024 33 of 34 pre-existing dispute. Thus, Petition is not maintainable on threshold

itself as (i) invoices totaling ₹45,07,324/- fall under Section 10A, and (ii)

₹26,00,000/- invoice is disputed, reducing actual claim below threshold.

We also find that disputes over several invoices and interest calculations,

and also claims that machines supplied were defective, and that these

quality disputes and consumer complaints predated the demand notice

all of which can be resolved outside the code.

Orders

56. There is no infirmity in the conclusions of the Adjudicating

Authority that Section 9 petition cannot be admitted on the grounds of

pre-existing dispute and on the issue of threshold. Accordingly, we

dismiss the Appeal. All related IAs are also dismissed. Appellant may

pursue other legal remedies. No orders as to costs.

[Justice N Seshasayee] Member (Judicial)

[Arun Baroka] Member (Technical) New Delhi.

November 28, 2025.

pawan

Company Appeal (AT) (Insolvency) No. 2272 of 2024 34 of 34